Chinese Court Orders Payment to Nabil Bank for Trishuli-3B Bank Guarantee

China’s High Court has ordered the release of $745,000 (approximately Rs 169.6 million) to Nabil Bank against the bank guarantee for the Trishuli-3B hydropower project, the bank said.

The Chinese construction company, Suifa ANHE Group, had requested Nabil Bank to issue a guarantee through China Everbright Bank. However, the Trishuli hydropower project revoked the contract in December 2023 and seized the bank guarantee, citing delays in project execution. Despite this, Nabil Bank had not received payment from the Chinese bank.

“The Chinese appellate court ruled in our favor on Monday,” Nabil Bank CEO Manoj Gyawali said. “The construction company may appeal to the Supreme Court, but both the trial court in Chengdu and the appellate court have ruled in our favor.”

Gyawali added that the Chinese contractor is unlikely to appeal to the Supreme Court, given the high costs involved, which could allow the bank to receive the withheld amount within December. “Once the funds are received, our second-quarter financial statements will improve, and our capacity to distribute dividends in the next fiscal year will increase,” he said. The bank has already provisioned an equivalent amount in its accounts.

Nabil appointed a Chinese legal consultant and successfully argued its case in court. Gyawali noted the decision came faster than expected. “Previously, similar cases took up to 10 years to resolve. We received a favorable judgment much sooner than anticipated,” he said.

Past Precedents

A similar delay occurred in the Melamchi Water Supply Project, where Himalayan Bank and the then Bank of Kathmandu struggled to receive payment from the Chinese contractor, China Railway Company, after the project canceled the contract. The Chinese court blocked payment under the counter-guarantee until 2020, eight years after the contract cancellation in 2012.

Likewise, in 2020, Nepal Investment Mega Bank successfully obtained bank guarantee funds for the Tanahu Hydropower Project from an Italian court after the project canceled a contract with the Italian company CMC di Ravenna in 2019.

These precedents highlight the challenges Nepali banks face in claiming international bank guarantee payments against project cancellations, often requiring lengthy legal proceedings abroad.